Daily Comment on News and Issues of Interest to Michigan Lawyers

01/14/2014

USSC Today: Simple Question, "Enormous" Federal Court Implications

In an ABA Journal story, UC Davis Law Dean Erwin Chemerinsky says that the outcome of a bankruptcy case argued today, Executive Benefits Insurance Agency v. Arkison, has huge implications for federal court workload. In Stern v. Marshall in 2011, a case involving a dispute over the Anna Nicole Smith estate, the Court ruled that bankruptcy courts cannot issue a final judgment over state law claims. In his dissent in Stern, Justice Breyer worried about the effect of that decision on federal workload, but the impact of Stern has, Chemerinsky says, been mitigated by the "vast majority" of parties consenting to state law claims being decided in federal bankruptcy. Today, the Justices will be considering whether that consent is sufficient to overcome constitutional concerns. If the Court decides it is not, Chemerinsky says, the decision will affect not only bankruptcy court litigation but the power of magistrate judges and arbiters:

A significant percentage of bankruptcy cases have state law claims and other matters where bankruptcy courts will not be able to issue final judgments. The bankruptcy courts instead will have to make reports and recommendations to the district court. As Justice Breyer feared, cases will ping-pong back and forth between the bankruptcy courts and the district courts.

The implications for the federal judicial system go far beyond that. Federal magistrate judges issue final judgments in civil cases, including holding jury trials, with the consent of the parties. Magistrate judges, like bankruptcy judges, are non-Article III judges who sit for fixed terms. If consent is not sufficient, no longer could they decide state law matters. The workload increase for federal district courts will be significant.

There is a split among the federal courts of appeals on the question. The 9th circuit decision says even implied consent is okay. But the 5th, 6th, and 7th circuits say otherwise.

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USSC Today: Simple Question, "Enormous" Federal Court Implications

In an ABA Journal story, UC Davis Law Dean Erwin Chemerinsky says that the outcome of a bankruptcy case argued today, Executive Benefits Insurance Agency v. Arkison, has huge implications for federal court workload. In Stern v. Marshall in 2011, a case involving a dispute over the Anna Nicole Smith estate, the Court ruled that bankruptcy courts cannot issue a final judgment over state law claims. In his dissent in Stern, Justice Breyer worried about the effect of that decision on federal workload, but the impact of Stern has, Chemerinsky says, been mitigated by the "vast majority" of parties consenting to state law claims being decided in federal bankruptcy. Today, the Justices will be considering whether that consent is sufficient to overcome constitutional concerns. If the Court decides it is not, Chemerinsky says, the decision will affect not only bankruptcy court litigation but the power of magistrate judges and arbiters:

A significant percentage of bankruptcy cases have state law claims and other matters where bankruptcy courts will not be able to issue final judgments. The bankruptcy courts instead will have to make reports and recommendations to the district court. As Justice Breyer feared, cases will ping-pong back and forth between the bankruptcy courts and the district courts.

The implications for the federal judicial system go far beyond that. Federal magistrate judges issue final judgments in civil cases, including holding jury trials, with the consent of the parties. Magistrate judges, like bankruptcy judges, are non-Article III judges who sit for fixed terms. If consent is not sufficient, no longer could they decide state law matters. The workload increase for federal district courts will be significant.

There is a split among the federal courts of appeals on the question. The 9th circuit decision says even implied consent is okay. But the 5th, 6th, and 7th circuits say otherwise.